Turkish President Recep Tayyip Erdoğan dismissed Naci Ağbal as head of Turkey’s central bank just four months after his appointment because he was uneasy with Ağbal’s review of a costly policy undertaken during Erdoğan’s son in-law and former finance minister Berat Albayrak’s tenure of selling dollars — roughly $130 billion since 2019 — to defend the Turkish lira, according to a Reuters report on Wednesday.
Turkey’s opposition has been claiming that some $128 billion was sold from the Turkish Central Bank’s reserves in 2019-2020. Although Erdoğan and his monetary policymakers are trying to downplay the issue, the public, experts and the opposition have been demanding to know where the $128 billion has gone.
Three senior government and central bank officials, who spoke on condition of anonymity, told Reuters that the sacking of Ağbal by Erdoğan, which took place on March 20, was mostly related to his questioning of the policy of the sale of the central bank foreign exchange reserves and Erdoğan feared it triggering an outside investigation.
“Was there discomfort regarding this? Yes, there was. It was one of the influential issues in the presidential palace,” one of the sources said.
Another person with direct knowledge of the review of FX sales said it could have turned into an outside investigation had Ağbal remained at the bank.
Ağbal was appointed governor of the central bank after the bank’s former governor, Murat Uysal, was removed by Erdoğan on Nov. 7, 2020. A day after Ağbal’s appointment, Albayrak announced his resignation as finance minister in a statement on his Instagram account citing health problems. Albayrak’s resignation was linked to the his disturbance by the appointment of Ağbal as central bank governor at the time.
Albayrak and Ağbal are seen as representing two key factions of the Justice and Development Party (AKP), which has ruled Turkey for two decades under what analysts describe as an increasingly authoritative and impulsive Erdoğan.
One of the sources said “the first shadow fell over” Agbal on Feb. 24 when the bank made an apparently routine adjustment to reserve requirements that was interpreted by Erdogan as a veiled interest rate hike.
The $130 billion in sales by state banks were backed by central bank swaps, and they cut net FX reserves — a country’s buffer against financial crisis — by about 75 percent.
“Ağbal was not happy that his job was being overshadowed by the previous policy of spending FX reserves,” said a person close to the bank.
During Ağbal’s short tenure, the lira first rallied 24 percent from a record low before beginning to slide when Erdoğan began defending Albayrak’s legacy. It jumped nearly 4 percent after Ağbal hiked rates by 2 percentage points on March 18 before plunging 13 percent when he was fired two days later, returning nearly to where it began.
Ağbal dismissal also came shortly after the central bank sharply hiked its main interest rate by a greater-than-expected 200 basis points on Thursday, from 17 to 19 percent.
Erdoğan is a strong opponent of high interest rates and once called them the “mother and father of all evil.”